The delinquency rate on commercial mortgage-backed securities rose to 0.43% at the end of the first quarter, according to Standard & Poor’s, a 27% increase from a delinquency rate of 0.34% at the end of 2007.

A slowdown in new CMBS issuance last year is one factor in the rise in the delinquency rate, according to the New York credit ratings agency, which considers loans 30 to 90 days past due as delinquent, as well as foreclosed and REO, or real estate-owned loans. CMBS delinquencies by principal balance were up nearly 20% to $2.73 billion at the end of the first quarter, from $2.28 billion at the end of 2007.

Multifamily properties led the uptick in delinquencies, accounting for 55% of the total. Indeed, apartment CMBS delinquencies were up 34% to $1.49 billion at the end of the first quarter. That is higher than the peak of $1.23 billion in lodging delinquencies seen in December 2003, when lodging properties suffered the fallout of a decline in travel following 9/11.

In the current housing downturn, multifamily properties have seen competition from a shadow market of condominiums and single-family homes for rent in some formerly overheated housing markets, particularly Las Vegas and Southeast Florida. Loans in Texas, Florida and Nevada accounted for more than 56% of those delinquencies. Standard & Poor’s is not only tracking CMBS delinquencies in the overheated markets, but also in Midwestern states suffering from weak employment trends.

Class-B and Class-C apartment properties have been hit hardest, considering that prospective homeowners are moving into Class-A properties while they wait for the single-family housing market to stabilize. In addition, college graduates, who are finding it difficult to land jobs, are likely to hold off on renting, further impacting demand for Class-B and Class-C properties.

The delinquency rate on multifamily properties was more than four times that of lodging and industrial properties, which each came in at 0.35% at the end of the first quarter. Retail properties were next, with a delinquency rate of 0.25%, followed by health care properties at 0.24%, and office properties at 0.16%.

Breaking down CMBS delinquencies by vintage year, loans originated in the years 2005, 2006 and 2007 — all years of lax underwriting — account for over 53% of the delinquencies.

In another measure of performance, there were 1.7 CMBS upgrades for every single downgrade at the end of the first quarter. However, this is down from a 2.87-to-one ratio at the end of the fourth quarter of 2007.

In a recent CMBS surveillance teleconference, Fitch Ratings analysts said they expect downgrades to go up this year, particularly on below-investment grade bonds. Currently, however, there are still nearly two upgrades for each single downgrade.